Incentive Design in a Distributed Problem with Strategic Agents

Abstract

In this paper, we consider a general distributed system with multiple agents who select and then implement actions in the system. The system has an operator with a centralized objective. The agents, on the other hand, are selfinterested and strategic in the sense that each agent optimizes its own individual objective. The operator aims to mitigate this misalignment by designing an incentive scheme for the agents. The problem is difficult due to the cost functions of the agents being coupled, the objective of the operator not being social welfare, and the operator having no direct control over actions being implemented by the agents. This problem has been studied in many fields, particularly in mechanism design and cost allocation. However, mechanism design typically assumes that the objective of the operator is social welfare and the actions being implemented by the operator. On the other hand, cost allocation classically assumes that agents do not anticipate the effect of their actions on the incentive that they obtain. We remove these assumptions and present an incentive rule for this setup by bridging the gap between mechanism design and classical cost allocation. We analyze whether the proposed design satisfies various desirable properties such as social optimality, budget balance, participation constraint, and so on. We also analyze which of these properties can be satisfied if the assumptions on cost functions of the agents being private and the agents being anticipatory are relaxed.

A Distributed and Resilient Bargaining Game for Weather-Predictive Microgrid Energy Cooperation

“…In W1, the weather is likely to be more sunny and windy than in W2, facilitating RG. Using the parameters above, the active users' renewable power generation is predicted by (17). Fig.…”

“…Several approaches to fair cost allocation for cooperative games have been proposed in [13]- [15]. To date, most cost allocation methods in power grid focused either on splitting the incurred cost [16] or the deviation from the users' aggregated contract after power consumption [17]. To the best of our knowledge, only [7] addressed cost allocation for distributed microgrid power scheduling.…”

“…If the bargaining outcome is positive, the users' allocated costs can be viewed as their individual contracts with the utility company, which are augmented after consumption if the actual power cost deviates from its predicted value due to the demand, RG, and price variation, using e.g. [16], [17]. If bargaining fails, users might choose to act individually or make another cooperation attempt.…”